Foreign aid budget


Budget Review 2022–23 Index 

Dr Angela Clare

Australia’s foreign aid program in 2022–23 amounts to an estimated $4.549 billion, an increase of $241 million on the 2021–22 estimate of $4.335 billion (inclusive of temporary measures).

In line with the Government’s recent aid budgets, the 2022–23 aid figure has 2 components: $4.089 billion in ‘baseline’ Official Development Assistance (ODA) and $460 million in ‘temporary, targeted and supplementary’ measures—also ODA, and largely aimed at supporting the region’s COVID-19 response and recovery efforts. The temporary measures build on the Government’s 2020 commitment of an additional $1 billion for the region’s COVID-19 response, and include:

  • $281 million towards the economic and social costs of COVID-19 in the Pacific and Timor-Leste (part of a new 2-year $324.4 million package of support)
  • $98.3 million for vaccines in the Pacific and Southeast Asia
  • $61.5 million support for economic recovery in Southeast Asia.

This year sees the base aid budget return to partial indexation (2.5%) for the first time in 4 years, after the Government froze funding at $4 billion in 2018.

As Table 1 shows, with funding for the aid base remaining flat in future years, the extension of temporary measures is expected to push out a drop in forward estimates by one year, according to the Australian National University’s (ANU) Australian Aid Tracker:

Table 1         Forward estimates, current prices and inflation adjusted (2022–23 prices)

Expenditure ($ million) 2020–21 2021–22 2022–23 2023–24 2024-25 2025–26
Current prices 4,505 4,460 4,549 4,338 4,327 4,427
2022–23 prices 4,838 4,594 4,549 4,222 4,098 4,091

Source: ANU Development Policy Centre, Australian Aid Tracker, Australian Aid over Time

Aid groups have welcomed the Government’s continuation of support for COVID-19 recovery in the region, particularly as the impact of the pandemic increases in countries such as the Solomon Islands, Kiribati and Tonga. Vaccination rates remain low in some Pacific Island countries, including Vanuatu (where 31% of people have had at least one dose), the Solomon Islands (33%) and Papua New Guinea (3.5%).

The Australian Council for International Development (ACFID) is one of a number of aid groups to call for the temporary increases to the aid budget to be made permanent, arguing that the problems they are targeting are ‘anything but temporary’. It also argues that the distinction between temporary measures and ‘base’ assistance is ‘confusing our long-term intentions and relationships in the region’ and that this ‘outdated framing’ should be dropped.

ODA-to-GNI ratio

Australia’s ODA as a proportion of Gross National Income (GNI)—the official measure of development assistance—is expected to remain at the 2021–22 level of 0.20%. This continues to place Australia well below the OECD Development Assistance Committee (DAC) country average of 0.32%. In 2020 Australia ranked 21 out of 29 OECD DAC countries on the generosity of its aid, measured by the ODA-to-GNI ratio. On current estimates Australia’s ODA-to-GNI ratio is expected to tail off to 0.17% by 2025–26 (see Figure 1).

Figure 1        Australia’s ODA-to-GNI ratio, 1991–92 to 2025–26 (estimated)

Figure 1 graph showing Australia’s ODA-to-GNI ratio, 1991–92 to 2025–26 (estimated)

Source: ANU Development Policy Centre, Australian Aid Tracker, Generosity: Australian Aid as a Percentage of GNI

In the last 10 years the aid program has seen significant cuts, as Figure 2 shows.

Figure 2        The aid trajectory since 2012–13, ODA ($m) 2022 prices

Figure 2 graph showing The aid trajectory since 2012–13, ODA ($m) 2022 prices

Source: ANU Development Policy Centre, 2022 aid budget breakfast presentation

Aid as a proportion of Government spending is 0.72% in 2022–23, down from 1.32% in 2012–13. ANU analysis suggests that aid spending is now around $1 to every $12 spent on defence, compared to a ratio of around $1 to $6 in previous decades.

ACFID has called for legislated, stepped targets to ensure Australia achieves a 0.7% ODA-to-GNI ratio by 2029–30, the United Nations target for donor countries. The United Kingdom legislated an annual aid budget of 0.7% of GNI in 2015, but dropped this to 0.5% in 2021 as a temporary measure, citing the economic impact of COVID-19.

Geographic and sector focus

The small increase to baseline ODA and $460 million in temporary measures has meant increased allocations across several geographic areas in 2022–23, with the largest going to Southeast Asia and the Pacific. The Pacific will receive a record high of $1.85 billion—$1.501 billion in ‘base’ aid and $346 million in temporary measures—or around 40% of the aid program. Aid experts expect that much of this additional funding will take the form of direct budget support to Pacific Island governments to support their COVID-19 response efforts. Southeast Asia is set to receive $114 million in temporary measures in 2022–23.

Table 2 shows Australian aid flows by region since 2019–20. Allocations are sourced from the Budget papers, and do not include additional COVID-19 support measures.

Table 2         Total Australian ODA ($ million), 2019–20 to 2022–23, by region*

Region 2019–20(a) (actual) 2020–21(a) (actual) 2021–22(b) (estimate) 2022–23(b) (estimate)
PNG & the Pacific(c) 1,397.3 1,447.9 1,441.8 1,501.0
Global & other ODA** 861.3 964.0 1,180.9 1,158.5
Southeast, East and other Asia 1,165.2 1,011.4 1,012.0 1,032.3
South & West Asia 336.9 345.5 273.1 305.1
Middle East & Africa 305.3 235.9 90.7 90.7
Latin America & the Caribbean 3.9 3.4 1.6 1.5
Total ODA 4,070 4,008 4,000 4,089

* Excludes additional COVID-19 support.
** Includes regional and global programs that cannot be disaggregated to a lower geographical level.

(a) Department of Foreign Affairs and Trade (DFAT), Australia’s Official Development Assistance: Statistical Summary 2020–21
(b) DFAT, Australian Aid Budget Summary 2022–23
(c) Of these totals, allocations for PNG are: 2019–20, $618.9 million (actual); 2020–21, $611.8 million (actual); 2021–22, $587.8 million (estimate); 2022–23, $596.2 million (estimate).

Gender and disability inclusion

Gender equality continues to be a focus for the aid program, with an estimated $1.5 billion to advance this objective in 2022–23, of which $500 million will be spent in the Pacific. Aid groups have welcomed the ‘Women Together’ initiative, which provides $300 million over 5 years to support women’s economic empowerment and leadership in regional peace and stability, and to support responses to gender-based violence in Southeast Asia.

ACFID points out that funding for disability inclusion in the aid program has not been increased after a series of cuts which saw disability spending through country and regional programs decrease from $125.8 million in 2013–14 to $97.7 million in 2020–21.

Climate financing

At last year’s COP26 summit Prime Minister Morrison pledged an additional $500 million to the $1.5 billion the Government promised for climate change funding in 2020, bringing the Government’s climate finance commitment to $2 billion between 2020 and 2025. Aid groups note that how this funding will be calculated and spent remains unclear, while the ANU’s Development Policy Centre’s Terrence Wood argues that given current budget trajectories, the aid program will struggle to meet this commitment.

UN analysis shows that developed countries are falling well short of their commitments to help developing countries adapt to the effects of climate change, and that adaptation costs are 5 to 10 times higher than current international finance flows. Some aid observers also point out that most climate finance for developing countries is not new money, despite the UN Framework Convention on Climate Change (adopted in 1992) principle that ‘all climate financing should be “new and additional” to other financial flows to address the additional costs of climate change’. Analysis from CARE shows that across 23 donor countries examined in 2018, only 6% of climate finance was additional to aid targets.

Humanitarian funding

At $470 million, the 2022–23 estimate for humanitarian funding falls short of the $500 million annual spend pledged in the 2017 Foreign policy white paper. However, DFAT reporting on actual expenditure shows that the Government achieved this target in both 2020–21 ($541 million) and 2019–20 ($520 million).

Some $66 million has been allocated to Afghanistan—an increase of 30% on last year—with a refocus on humanitarian needs. At the United Nations Pledging Event on Humanitarian Assistance to Afghanistan on 1 April, Australia committed an additional $40 million in humanitarian funding over 2021–24.

In South and Southeast Asia, Bangladesh received a 10% increase, taking total funding to $147.7 million, with COVID-19 and the Rohingya refugee crisis among the priorities for Australian support. Funding for Myanmar has increased slightly to $98.6 million, with Australia’s focus again pivoting to humanitarian support to address the impacts of political instability, conflict and COVID-19 in the country.

In March 2022 the Government committed an additional $50 million in humanitarian funding to the Ukraine crisis (to be sourced from the 2021–22 ODA allocation), bringing Australia’s total humanitarian support to Ukraine to $65 million.

NGOs have been critical of the Government’s failure to support the crisis in Yemen, where civil war has raged for over 7 years. Save the Children argues that Australia’s failure to support the aid effort in the country ‘was particularly concerning when the Government continue [sic] to allow Australian-made, taxpayer-subsidised weapons to be exported to key combatants in the war’.

COVID-19 and health security

Australia has so far provided over 25 million doses of COVID-19 vaccine to countries in Southeast Asia and the Pacific, as part of its pledge to provide 60 million doses to the region by the end of 2022.

The Government will provide a further $85 million for the COVAX Advance Market Commitment to tackle new COVID-19 variants and help lift global vaccination rates (of this, $77 million is additional ODA in 2021–22). This contribution brings Australia’s total commitment to COVAX to $215 million. Australia has also committed $100 million over 5 years to the Coalition for Epidemic Preparedness Innovations (CEPI) to help address current and future pandemics.

Prior to the Budget Australia had contributed just 0.8% of a total of $18.1 billion for the global COVID-19 response, according to World Health Organization data.

The vaccine gap between rich and poor countries remains significant: only 15% of people in low income countries have so far received one dose of COVID-19 vaccine, compared to 80% in high and upper-middle income countries.

Infrastructure

The Government has doubled the lending cap on non-concessional loans through the Australian Infrastructure Financing Facility for the Pacific from $1.5 billion to $3 billion. The ODA-eligible grant component of the facility remains unchanged at $500 million.

Sector funding since 2013–14

Cuts to the aid budget between 2013–14 and 2020–21 have been felt most severely in the education sector, which has seen a drop of $621 million (2022 prices), according to ANU Budget analysis. Governance and resilience have also suffered significant cuts ($458 million), while health is the only sector to have seen increased funding over this period, with an additional $231 million.

Other commentary

The Opposition has pledged to increase aid as a percentage of GNI every year that it is in office, ‘starting with our first budget’. However, it has not yet released expenditure targets. The Opposition has also committed to strengthen Australia’s relations with Southeast Asia, including by establishing a $200 million climate and infrastructure partnership with Indonesia.

The Australian Greens advocate for an increase in Australia’s ODA to a minimum of 0.7% of GNI, ‘with provision for increases in the event of natural disasters or conflicts requiring major humanitarian interventions and climate reparations’.

One of Australia’s most senior diplomats, Gary Quinlan (now retired former ambassador to Indonesia and Australia’s representative to the United Nations), has criticised the Government’s cuts made since 2014 to aid to Southeast Asia and called on the Government to increase its development spending to ‘help build its influence and buttress regional stability’. Australian aid to Southeast Asia fell from around $1.3 billion in 2014–15 to just over $900 million in 2019–20.

Economists have argued that donors such as Australia should help countries in our region recover from the ‘economic devastation’ caused by COVID-19 by providing both grants and loan-based finance. Roland Rajah and Alexandre Dayant from the Lowy Institute have argued that Pacific countries face ‘a potential “lost decade”’ as a result of the pandemic and are unable to finance the ‘scale of government largesse needed to limit the damage’.

Stephen Howes and Cameron Hill from the ANU’s Development Policy Centre welcome Australia’s provision of a total of $2.7 billion in ‘cheap but non-concessional loans’ to the Indonesian and Papua New Guinea governments since late 2019, adding that ‘No [Australian] government has ever provided as much debt financing for our neighbours’. The loans—with an interest rate set at Australia’s bond rate plus 0.5% margin for administrative costs—take advantage of Australia’s ability to borrow at interest rates far lower than a country such as PNG can do. While Australia’s $1.5 billion loan to Indonesia was not a ‘game changer’ given the scale of its finance needs, economists nonetheless argue that the loan was a welcome contribution to easing Indonesia’s debt burden.

 

All online articles accessed April 2022

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